Monday, May 20, 2013

A Tale of Two Cities: Southern Hemisphere

A few weeks ago I took a trip from my temporary home of São Paulo to Buenos Aires. This trip is a study in contrasts and a fascinating study for an economic naturalist.

Street market in San Telmo

São Paulo is a reflection of modern Brazil. As a city it has sprung up like a weed - all rapid growth and no planning - and now the government is desperately trying to bring some order and their showcase weed-garden hampered by the fertilizer of robust growth that keeps the weeds springing up all over. As I have mentioned before, what is curious about SP is that the private investment in amenities (all safely within the confines of luxury apartment complexes) results in even less interest in creating lively and livable public spaces. The public good problem writ large.

La Bombonera - legendary home of Boca Juniors

Buenos Aires is a reflection of the past glory of Argentina. As a city it evolved slowly and it was plotted, planned and designed to resemble the grand European capitals from whence the population largely came. It is like a beautiful European garden that at one time was glorious but now has been left to decay a bit. Despite the neglect and decay however, the city retains its charm. Perhaps because of the repeated economic crises that have hit Argentina and perhaps because of the populism of the government there is still heavy investment in the public spaces of BA and because of that the city seems to revel in them and for that the city feels more human and humane.

Graffiti

I was surprised at how much English was spoken in BA by almost everyone you encounter from taxi drivers to waiters the clerks. This is in stark contrast to SP where almost no one speaks English apart from wealthy business types. I speculated that this is partly a reflection of the two economies: employment opportunities are abound in SP and labor is scarce so less educated workers find themselves working in restaurants, taxis, hotels and the like. Since Argentina's economy has been so poor, highly educated young adults are resorting to restaurant work, taxi driving and so on. Even the bell-boy of our rather modest hotel spoke almost fluent English. I speculated as well that in Brazil English was not seen as a pathway to success, there is plenty of economic opportunity domestically so the incentive to learn English is less than in Argentina where domestic opportunity is scarce.

Porteños relaxing in the park on a perfect day in BA. Other than the gated and heavily patrolled Iburapuera park, you will not find this in SP. This is Parque Las Heras.

I still think there could be a lot of truth to these theories but my Brazilian friends had another when I mentioned it to them: Argentina is a lot more educated than Brazil, full-stop. And it is true. Argentina has a high-school enrollment rate of over 70% while Brazil's is around 36%. The average years of education for an Argentine is 9.3 while for a Brazilian it is 7.2. Though I knew the stats for Brazil I was surprised at the stats for Argentina.

Modern BA: Old cars and new heros.

Still one cannot escape the difference in the energy of Brazil versus Argentina - Brazil's feels like a booming economy, no where more so than SP, while Argentina still feels like it is struggling and BA reflects this. Black market money changers assault you all over tourist areas of BA thanks to the government trying to control the exchange rate at about 5 pesos to the US dollar when the black market is offering 10 (when the black market rate hit 10, they Argentine press said it had reached the Messi-Peso!). The Kirchner government is trying to control prices by fiat and even tried to prosecute economists for publishing an non-government approved inflation rate. Unemployment is high but there are a lot of public works going on which is nice in the Keynesian sense but worrying given Argentina's recent debt history.

Still despite all this I found Buenos Aires to be delightful. I last visited BA in 2009 and I found it very grim. The weather was cold but the mood seemed dark. I was pleasantly surprised to find the mood considerably better (the absolutely perfect weather certainly helped) and surface signs that the economy was picking up abounded - full restaurants, few empty shops in the main commercial areas, etc. And, by the way property in BA is incredibly cheap - large luxury apartments in Palermo, for example, go for around US $150,000, so if you want to be an international speculator in property, this is a good place to start.

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